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NEW YORK (TheStreet) -- InvenSense (INVN) investors and those considering adding the stock to their portfolios may have been disappointed with the company's fiscal second-quarter results, released Tuesday. Management did, however, offer valid reasons for the company's earnings miss:

  • Reduced profit margins for two large clients, generally assumed to be Samsung (SSNLF) and Apple (AAPL) - Get Apple Inc. Report .
  • Depreciation of older products. InvenSense CFO Mark Dentinger said, "We did move some older material at reduced margins during the quarter." This reduced gross margins by 8%, he added.

On the plus side, the company has not reduced its fiscal full-year forecasts and is committed to defending and expanding its current market share. Smartphones, gaming consoles and wearable devices were identified as growth areas, with management hinting that InvenSense could well have revenue growth of more than 35% in fiscal 2015.

The biggest problem with portable connected devices has always been power consumption and battery life. InvenSense provides system-on-a-chip solutions that reduce power consumption, and its latest product, announced Tuesday, is a motion SoC (system on a chip) optimized for Google's (GOOGL) - Get Alphabet Inc. Class A Report Android Lollipop 5.0. The SoC is currently in production and will make the new sensor functions in Android Lollipop possible. We can expect these chips in Android devices by the end of the year.

"The newest member of our M-2 series product line, the InvenSense ICM-20645 MEMS SoC enables the next generation of activity, location and context aware applications," said Ali Foughi, vice president of Marketing and Business Development at InvenSense. "ICM-20645 is easily upgradeable for existing smartphone, tablet and wearable designs running Android Jelly Bean or KitKat."

Android is one platform, but what about Apple's iOS? As indicated in an iPhone 6 teardown by iFixit, InvenSense also has a presence in this market, as its MP67B 6-axis Gyroscope and Accelerometer Combo is used. Given its presence in the iPhone 6, many speculate that InvenSense will provide the sensor solution for the Apple Watch, which is expected in early 2015. As no official announcement has been provided, we may well have to wait for another teardown to investigate the components used.

The Internet of Things is driving many innovations, and demand for sensor-driven devices and apps continues unabated. According to a study by Acquity Group, now part of Accenture (ACN) - Get Accenture Plc Class A Report , 22% of consumers will own a wearable device by the end of 2015 and 72% will purchase one within five years.

Even late adopters are keen to own these devices, with 62% of self-proclaimed late adopters planning to purchase a wearable device in the next five years, and 24% will do so in the next two.

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"These digital devices present major opportunities for improving a brand's customer experience for a range of consumers," said Jay Dettling, president of Acquity Group.

With ABI Research forecasting that the wearable device market will grow to $6 billion in 2018, is it any wonder that InvenSense stock remains a recommended buy?

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At the time of publication, the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

TheStreet Ratings team rates INVENSENSE INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate INVENSENSE INC (INVN) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and feeble growth in the company's earnings per share."

You can view the full analysis from the report here: INVN Ratings Report